FHA Loan Limits Decreasing For Utah

FHA has decided to lower the amount of money they will loan up to in many counties in Utah. Here is a list of what they will currently be as of October 1, 2011.

Utah County: $271,050

Salt Lake County: $600,300

Davis and Weber Counties: $389,850

FHA Makes Home Ownership More Affordable

Earlier this year -- and for the first time in its history -- the FHA changed its funding fees and mortgage insurance structure.

Effective October 1, 2008, it's repealing those changes.
Partly to keep FHA home loans affordable, and partly to comply with new laws, the FHA is rolling back its up-front fees and ongoing mortgage insurance requirements and replacing them with new ones.

The new up-front FHA fees are as follows:

-- 1.750% : All purchase and "standard" refinances
-- 1.500% : All "streamline" refinances
-- 3.000% : All FHASecure programs for delinquent mortgagors

These fees are paid as a one-time cost at closing, and are calculated by multiplying the loan size by the fee. A $200,000 FHA purchase, for example, now carries a $3,500 one-time charge.
Ongoing mortgage insurance requirements have changed, too. These changes are based on the loan type and the amount of equity in the home.

-- 15-year fixed with 90% borrowed or less: 0.000% annually
-- 15-year fixed with more than 90% borrowed: 0.250% annually
-- 30-year fixed with 95% borrowed or less: 0.500% annually
-- 30-year fixed with more than 95% borrowed: 0.550% annually

Mortgage insurance premiums are calculated by multiplying the initial loan size by the annual premium. The same $200,000 FHA purchase outlined above, using a 95% 30-year fixed mortgage, would require a monthly mortgage payment add-on of $83.33 until the loan is paid in full.

FHA-insured mortgages have grown in popularity this year because, while the guidelines of other mortgage products have tightened, FHA guidelines have remained relatively loose. FHA allows 3.500 percent downpayments on purchases, for example, and allows "cash out" refinances to 95 percent.

Fannie Mae and Freddie Mac do not.

Fannie Mae Increases Its Mandatory Loan Fees For All Borrowers

Fannie Mae announced a new risk-based pricing model and additional mortgage delivery fees this week, adding to the cost of buying or refinancing a home.

Risk-based pricing was first introduced by Fannie Mae this past April. It added new, mandatory loan fees for high-risk borrowers while rewarding a small group of low-risk borrowers with fee credits.

In the updated model, even 720 credit scores with a 20 percent downpayment won't protect mortgage applicants from the risk-based fees and they can range as high as 2.750 percent, depending on credit scores and loan-to-value.

Fannie Mae will continue the practice of rewarding low-risk borrowers with fee credits.

Fannie Mae's second pricing change involves the Adverse Market Delivery Charge and it is not risk-based -- it applies to all applicants equally.

First introduced in December 2007, Adverse Market Delivery Charges are mandatory surcharges on all conforming mortgages. The fee was initially a quarter-percent. It's now doubled to 0.500 percent.

Combining risk-based pricing and delivery fees, mortgage applicants have two choices to pay them:

1. As a one-time fee, paid at closing, payable to the lender
2. As an interest rate increase, payable month-after-month to the lender

The one-time fee is calculated by multiplying to fee amount by the applicant's loan size and dividing by 100. The interest rate increase is calculated as a general rule, where each 0.500 percent in fees can be substituted for a 0.125 percent increase to a mortgage rate.

The fees become "official" October 1, 2008, but lenders are expected to deploy them much sooner.

The New Housing Bill

Monday, President Bush signed the Housing and Economic Recovery Act of 2008 into law and the press jumped on the obvious storylines:

1. First-time home buyers get a $7,500 purchase "credit"
2. Conforming loan limits move to $625,000
3. Delinquent homeowners get a lifeline from the FHA
4. Local governments get federal money for buying and restoring foreclosed homes

However, their are three problems with the new bill that you may want to know about. The first is in a section called "Revenue Offsets", there's an important tax implication. The new housing law changes the way in which capital gains exclusions are calculated on the sale of a residence.

Under the old system, a taxpayer was entitled up to $250,000/$500,000 of tax-free gains from the sale of a home if filing separately/jointly provided he lived in the residence for at least 2 of the preceding 5 calendar years.

Savvy homeowners exploited this verbiage, moving from home-to-home every 2 years to avoid paying capital gains.

The new law thwarts this tactic.

Capital gains exclusions are now calculated by taking the capital gains on the sale of the home and multiplying it by a ratio of how long a person has lived in a home, by how long that person owned the home.

In the example above, a person living in a home for 2 of 5 years would be entitled to 40 percent of tax-free gains on a home sale instead of all of it. As always, however, it's best to talk with a qualified accountant about how tax code changes may impact you personally.

The new capital gains rules go into effect starting January 1, 2009.


The second problem, is that the bill eliminates down payment assistance.

Currently under FHA you have to put 3% down and it can come as a gift from the seller. Which means you can essentially buy a home with nothing down (100% financing).

The bill contains a provision (SEC. 2113) which forbids FHA from insuring mortgages in which the borrower’s downpayment comes from a private downpayment assistance provider.

This will take place October 1, 2008. So, in other words, as of that date you can no longer do 100% financing when buying a home. You have a down payment.

The third problem with the bill, is that the down payment on FHA will go up from 3% down to 3.5%.

This will also take place October 1, 2008.

Mandatory FHA Loan Fees Increase For Some, Fall For Others

For the first time in its history, the FHA changed its funding fees and mortgage insurance structure this week. FHA-insured home loans are now subject to a risk-based pricing adjustment, as shown by the table above.

Because of risk-based pricing, FHA home loans are now more expensive for borrowers with less-than-ideal credit profiles, and less expensive borrowers with perfect ones.

Prior to the changes, most FHA borrowers paid an up-front fee of 1.500 percent, plus on-going annual mortgage insurance payments equal to one-half-percent on the amount borrowed.

FHA-insured mortgages have grown in popularity this year because, while the guidelines of other mortgage products have tightened, FHA program guidelines have remained loose. FHA allows 3 percent downpayments on purchases, for example, and allows "cash out" refinances to 95 percent.

Fannie Mae and Freddie Mac do not.

(Image courtesy: FHA.gov)

The "New" King!

The market is changing and because it is changing a new product is beginning to be huge; FHA Loans.

The reason is because subprime loans have all but gone away and now 100% loans are leaving us too. All this is beginning to make FHA loans the best option for many people.

FHA is a government backed loan that exists to help get people into homes. The government believes in homeownership and for this reason they have FHA loans.

FHA loans typically have very good rates and are possible to get into with no money down.

With FHA loans a lender has to have a "brick and mortar" business within 200 ft. of the home that is being loaned on, but not with Envision! We have applied for a national license and have received it! What does this mean? Well in the current 46 states I can do loans in I can also do FHA loans! This is a very important loan and probably will be the future for the next 3-5 years.

Some important points to note about FHA loans is:

• 1.5% fee up front just to use FHA (can be wrapped into the loan)
• 3 % down payement required (this can be gifted from the seller)
• Not a FICO (credit score) driven product
• Must have clean mortgage history for most recent 12 months.
• Must put down at least $500 out of pocket.
• No reserves (i.e. 2 months worth of income) required
• Can only have 1 owner occupied FHA loan and 1 Investment FHA loan at once.
• Similair rates to if you were putting 20% down on a home.

If any of this is confusing call me up today and we can talk about your situation and what you are looking at doing.